Dr.William Allender

Assistant Professor

Marketing

BIO

Dr. Allender’s research focuses on the development and application of statistical methods in marketing. His research deals with quantifying aspects of consumer behaviour using data routinely collected by many organizations, and its relationship to behaviour prior to purchase. These insights are used to develop new approaches to market definition and market segmentation, to inform new product development & innovation, pricing, and/or promotion decisions.

JOURNAL
PUBLICATIONS

October 2013

Consumers Search And The Choice Overload Hypothesis

CONSUMERS SEARCH AND THE CHOICE OVERLOAD HYPOTHESIS

In this paper we use an experimental approach to study the relationship between the number of products presented to a consumer and their subsequent search and purchase behavior. By imposing a search cost, and a preference for variety, we induce search behavior in the presence of a preference for variety that leads the participants to make both single, and multiple-purchase decisions. This paper shows that the ability to shop more efficiently allows consumers to focus on finding products that meet their exact specifications in differentiated product categories. With uncertainty over product attributes, no single choice stands out as a clear favorite a priori, so utility rises the more choices are available, but at a decreasing rate. We find that as the size of the consideration set grows, consumers search less and are more apt to purchase, but this effect is highly non-linear. Beyond a certain point, search expands as consumers become unwilling to choose. Retailers can increase the assortment available to persuade a consumer to patronize their store and avoid searching another. However, this does not increase without bound. Eventually, a consumer will be overwhelmed by the number of products offered and search the other store as well, or possibly instead. The degree to which consumers are overburdened by the variety offered exhibits significant heterogeneity among consumers.

August 2013

Demand For Variety Under Costly Consumer Search: A Multiple-Discrete/Continuous Approach

DEMAND FOR VARIETY UNDER COSTLY CONSUMER SEARCH: A MULTIPLE-DISCRETE/CONTINUOUS APPROACH

We offer a structural model that recognizes consumers have to incur a cost in order to resolve product uncertainty, and that some individuals have a preference for variety that leads to the selection of more than one product. Nearly all purchased products are characterized by some form of product uncertainty that must be resolved prior to a purchase decision. Many consumer demand situations exist in which individuals have a preference for variety that leads the multiple products being chosen in continuous quantities. Clothing, food, books, and music are but four important examples of goods that are regularly purchased many items at a time. We model the optimal consideration set formation and subsequent product selection decision when consumers have different preferences for variety. Our model is not subject to the curse of dimensionality and can accommodate situations in which a large number of alternatives are available, and the actual products searched is unobserved. We validate our model using a Monte Carlo experiment and apply it to ice cream purchases in which 19 options are available. Our results show that it is important to recognize consumers are limited in their ability to process information and do not consider all products available before making a purchase. The results of the Monte Carlo experiment suggest ignoring search costs and/or preference for variety will lead to biased parameter estimates, including underestimating price sensitivity. In particular, applying a single product purchase model, such as the logit or probit, to situations in which multiple products are sometimes purchased will lead to erroneous managerial conclusions. We also find a direct relationship between consumers' preference for variety and the size of the consideration set, as well as the number of products purchased. What's more, the number of products in the consideration set expands before the number of product purchased increases. Finally, our results also suggest that the variance of prices in the market is a reasonable approximation of consumers' individual product search costs.

JOURNAL : REVIEW OF INDUSTRIAL ORGANIZATION

OTHER PUBLICATIONS

Media Advertising And Ballot Initiatives: An Experimental Analysis

MEDIA ADVERTISING AND BALLOT INITIATIVES: AN EXPERIMENTAL ANALYSIS

Spending on political advertising increases with every election cycle, not
only for congressional or presidential candidates, but also for
state-level ballot initiatives. There is little research in marketing,
however, on the effectiveness of political advertising at this level. In
this study, we conduct an experimental analysis of advertisements used
during the 2008 campaign to mandate new animal welfare standards in
California (Proposition 2). Using subjects' willingness to pay for
cage-free eggs as a proxy for their likely voting behavior, we investigate
whether advertising provides real information to likely voters, and thus
sharpens their existing attitudes toward the issue, or whether advertising
can indeed change preferences. We find that advertising in support of
Proposition 2 was more effective in raising subjects' willingness to pay
for cage-free eggs than ads in opposition were in reducing it, but we also
find that ads in support of the measure reduce the dispersion of
preferences and thus polarize attitudes toward the initiative. More
generally, political ads are found to contain considerably more "hype"
than "real information" in the sense of Johnson and Myatt (2006).

2011

Market Power In The Carbonated Soft Drink Industry

MARKET POWER IN THE CARBONATED SOFT DRINK INDUSTRY

We investigate the strategic pricing for leading brands sold in the
carbonated soft drink (CSD) market in the context of a flexible demand
specification (i.e. random parameter nested logit) and a structural
pricing equation. Our approach does not rely upon the often used ad hoc
linear approximations to demand and profit-maximizing first-order
conditions. We estimate the structural pricing equation using four
different estimators (i.e. OLS, LIML, 2SLS, and GMM) and compare the
implied deviation from Bertrand-Nash competition. Our results suggest that
retailers, on average, price CSD brands below their cost, likely a result
of the competitive retailing environment. We also find CSD wholesalers
price their brands significantly more cooperatively than Bertrand-Nash
would suggest, thus inflating profits.

2009

Measures Of Brand Loyalty

MEASURES OF BRAND LOYALTY

Though brand loyalty has been studied extensively in the marketing
literature, the relationship between brand loyalty and equilibrium pricing
strategies is not well understood. Designing sales pricing strategies
involves two key decisions: the percentage reduction in price from the
existing price point, and the number or frequency of promotions within a
category or for a specific product. These decisions, in turn, are
critically dependent upon how many consumers can be convinced to switch to
a brand by temporarily reducing its price, and how many are instead brand
loyal. Theoretical models of how the size and strength of brand loyalty
influence optimal promotion strategies have been developed, but there are
no rigorous tests of their hypotheses. We test how brand loyalty impacts
promotion strategies for a frequently purchased consumer package good
category. Our results largely confirm that retailers often promote many
brands simultaneously and that depth and breadth can be complementary.